The state of California, through the Office of the Governor and the Judicial Branch, has initiated some specific steps to place what fairly can be described as a hold on the judicial process associated with residential evictions across the Golden State during and for 90 days after the state of emergency declaration. The state has not taken the same level of action in regard to commercial landlord and tenant relationships and commercial evictions during the COVID-19 state of emergency. We provide a general overview of the rights and obligations of commercial landlords during the California coronavirus state of emergency. In addition, we suggest some strategies for commercial landlords during this time period. 

Governor’s Executive Order and Its Impact on Commercial Landlords

On March 16, 2020, California Governor Gavin Newsom issued an Executive Order that sets out a framework in regard to the eviction of commercial tenants for nonpayment of rent during the COVID-19 state of emergency. Unlike the residential landlord-tenant counterpart, the provisions of the Executive Order addressing commercial leases do not establish a statewide moratorium on certain eviction proceedings in courts across the state.

What the Governor’s Executive Order does do is leave commercial evictions in the hands of county and city governmental officials across the state of California. The Executive Order eliminates any restrictions that may exist in California law that would prevent local units of government from taking action in regard to commercial landlord-tenant relationships and commercial evictions. In other words, the Governor has left it up to individual California cities and counties to put eviction moratoriums or to take other action regarding such matters during the COVID-19 state of emergency. 

Response of California Cities and Counties in Regard to Commercial Evictions

California is home to 482 municipalities and 58 counties. Each of these local units of government were granted the authority to blaze their own trails in regard to addressing the issue of commercial evictions during the COVID-19 state of emergency. In theory, the state could end up with 540 different derivations of commercial eviction procedures across the state. 

In fact, from north to south and from east to east in California, the manner in which commercial evictions are being handled has been something of an evolving process. What occurred in the City of Los Angeles illustrates the level of fluidity that has existed in regard to commercial landlords, tenants, and evictions of this nature. 

The day before the Governor issued his Executive Order, LA Mayor Eric Garcetti issued his own order that placed a moratorium on residential evictions in the city. The LA order specifically placed a moratorium on residential evictions when tenants could demonstrate an inability to pay as a result of circumstances associated with or arising from the COVID-19 pandemic. For example, a tenant lost his or her job because an employer was shuttered as a result of the stay at home directive and limitation on the operation of non-essential businesses. A couple of days later, on March 17, 2020, the LA Mayor expanded the moratorium to include commercial landlords and tenants.

City of Santa Monica Commercial Eviction Model

The City of Santa Monica was on the forefront of developing a structure for addressing commercial landlord and tenants as well as the commercial eviction process during the COVID-19 state of emergency. This structure has been widely adopted by cities and counties throughout California. Indeed, many local units of government have adopted the Santa Monica commercial eviction model word for word or with only minimal and nonmaterial alterations. This eviction model consists of four elements:

  • Types of prohibited evictions
  • Financial impacts related to COVID-19
  • Actions required of the tenant
  • Additional restrictions on a commercial landlord

Types of Prohibited Evictions

Across the state, the commercial eviction moratorium typically only involves cases for nonpayment of rent. A commercial landlord has the right in most jurisdictions in the state of California to pursue an eviction during the state of emergency for any other reason that may arise besides nonpayment of rent.

Financial Impacts Related to COVID-19

Under the terms of the widely adopted Santa Monica model, a tenant must demonstrate an inability to pay rent pursuant to a commercial lease because of financial issues associated with COVID-19. In addition, a landlord has the right to request documentation from a tenant supporting this contention. 

Examples of COVID-19 related financial impacts on a commercial tenant include:

  • Shutdown order as a part of the COVID-19 state of emergency
  • Drop in patronage of business because of COVID-19, even if a particular enterprise is allowed to remain open
  • Other types of slowdowns in a business’ operations and revenue
  • Reduction in hours of operation

Actions Required of Tenant

In order to take advantage of a local eviction moratorium under this model, a tenant must appropriately advise a landlord that a tenant cannot pay rent because of financial constraints directly associated with the COVID-19 pandemic.

Bear in mind that a commercial tenant is not relieved of paying rent. Rather, a tenant can delay payment if that tenant can demonstrate a financial issue associated with the COVID-19 pandemic. A tenant will be required to pay any unpaid rent in full within six months of the end of the state of emergency. It is important to note that this is one area in which a good many cities have departed from the Santa Monica model. Many cities have shorter payment periods. For example, the repayment period in Los Angeles is three months. 

Additional Restrictions on a Commercial Landlord

In addition to the parameters discussed a moment ago, under this widely adopted model, a commercial landlord cannot charge or collect a late fee for a rent payment that is delayed in being made as a result of the COVID-19 pandemic.

In the final analysis, a commercial landlord must continually monitor the state and extent of the eviction moratorium in the city and county where the commercial rental property is situated. As movement towards ending the California state of emergency gradually moves forward, a commercial landlord must be prepared to move forward with an eviction within the confines of applicable law and any remaining dictates associated with a local eviction moratorium.